Melvin J. Laney and Carolyn A. Laney - Page 44

                                               - 44 -                                                 

                  When this contention by petitioners first became apparent to                        
            the Court, on the morning of the sixth day of trial, the                                  
            following colloquy occurred:                                                              
                        THE COURT:  And all this time you have not                                    
                  provided for the Court, and I gather not provided for                               
                  respondent, a copy of the document that you are now                                 
                  telling us was your tax return for 1987.                                            
                        THE WITNESS [Laney]:  I discussed it at audit.  I                             
                  discussed it with appeals.  I have contended that we                                
                  did file on time and I have mentioned the fact that we                              
                  also asked for an extension and that a second return                                
                  was filed and petitioners have been consistent in that                              
                  position, Your Honor.                                                               
                        THE COURT:  Mr. Laney, I had understood until now                             
                  that when you said that you contended that your tax                                 
                  return was filed on time you were contending that you                               
                  had received extensions until May 5, 1989, and so the                               
                  question is whether or not you had indeed received such                             
                  an extension.  But now, if I understand correctly, you                              
                  are telling us no, that’s not the deadline that is                                  
                  applicable here and that is not the tax return that is                              
                  applicable here; the relevant deadline was August 15,                               
                  1988, and you satisfied that August 15, 1988, deadline                              
                  by mailing a tax return on August 15, 1988.                                         
                        THE WITNESS:  Yes, Your Honor.  When the trial                                
                  began for this day and we were discussing penalties                                 
                  petitioner said that he had a certified mail receipt                                
                  for the fact that he had filed his return on time and                               
                  that it was dated August 15, 1988.                                                  
                        THE COURT:  But the only stipulated document as                               
                  the tax return was Exhibit 2-B, which clearly showed                                
                  your signature and Mrs. Laney’s signature of May 1989,                              
                  which was a flat out contradiction to your position.                                
                        THE WITNESS:  But we still stated at that time                                
                  that we had filed a return on August 15th.  We’ve never                             
                  varied from that.  We also took extensive precautions                               
                  in case that return was in error to provide us with the                             
                  ability to file a second return without paying a                                    
                  penalty for having the refund if we did not deserve it.                             





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